Supply glitches pushes up vegetable prices

Written by Sandip Das | New Delhi | Updated: Oct 26 2011, 09:08am hrs
With rise in demand and inefficient supply system, the prices of key vegetables such as tomato, brinjal, potato and onion have risen sharply across cities during the last few weeks, pushing up the food inflation graph.

The governments weekly data on food inflation indicates that since August, with the exception of one week in September, the food inflation has remained above 9% and, in fact, crossed the 10% mark for the week ended October 9. The data also indicates that the key reason behind this spike in food inflation has been a sharp rise in the prices of vegetables.

Experts have attributed the rise in vegetable prices to the off-season demand for seasonal vegetables, storage constraints and lack of integration of various markets. Lack of integration of various agricultural markets and losses incurred due to absence of scientific storage facilities have been contributing to the rise in price of vegetables in the last few years, said P K Joshi, Senior Programme Coordinator, International Food Policy Research Institute (IFFRI).

Joshi said because of an inefficient supply system, there had been a gap in the demand and supply of seasonal vegetables. Lack of private sector investment in marketing of agricultural produce is leading to rise in transaction cost in vegetables trade, he noted.

Agriculture minister Sharad Pawar, while calling for agricultural marketing reforms, has said: "The prevailing system, which comprises regulated markets set up by the states under the Agricultural Produce Marketing Committee Act, has become a constraint in farmers ability to market their produce at the best possible prices."

Large number of intermediaries and large transaction costs, such as market fee and entry tax, make marketing reforms a priority, Pawar said at a meeting of the Parliamentary Consultative Committee last week.

An FE analysis of retail prices of key vegetables reveal that prices of tomato, onion, potato and brinjal have risen significantly during the last two months despite arrival of kharif crop in the market.

In Delhi, the average retail price of tomato has jumped 75% to R35 per kg at present from R20 per kg two months back. Similarly, tomato prices have risen sharply in all the key cities during the period. When the weekly food inflation crossed the 10% mark for the week ended October 9, the key reasons were vegetables becoming dearer by 17.59% compared to the week ended October 8 last year. Fruit prices grew 12.39%, milk 10.80% and eggs, meat and fish 14.10% in comparison to the same period last year.